Getting out of debt

Simply put, one approach to getting out of debt is to reverse the pattern of spending or the lifestyle that got you into debt. This of course is easier said than done. It requires a commitment to change and, possibly, adjusting to new habits that may seem, initially, like personal sacrifices.

The type of debt being discussed here is primarily credit-card debt. While it is generally a good idea to be totally debt-free, realistically, owing on a home mortgage or even an auto loan is a normal situation in our world, and that type of debt is not a major concern for most people. One reason is that the interest rates on these loans are comparatively low and the home mortgage payments are building equity that increases your net worth. This whole wealth-growing thing should be thought of as a lifelong endeavor. A well-planned combination of equity building and saving for retirement, plus a little luck, can lead to a relatively comfortable ‘golden years’.

But first, we must attack and eliminate all high interest debt. This is accomplished by seriously making debt reduction the highest priority in your life – after, of course, those basic things needed for survival: food, shelter, heat, transportation to work, education, and health care. Almost all other expenditures are luxuries that can be eliminated for a period of time (hopefully, months and not years). And yes, that includes your precious smart phone.

Anyone with credit card debt needs to be realistic and they must learn to make the tough decisions. It might be just a Vermont-Maine-New Hampshire thing, but I know several families that have eliminated TV from their lives, and the expense that goes with it. They not only save those dollars, but lead much more interesting and productive lives as well.

If you can develop this attack-and-destroy mind set, then a valuable next step would be to contact an experienced money coach like those available at The River Center in Peterborough. They can help with budgeting and planning, and they will provide a checklist that includes ways of saving money on everyday expenses that most of us have. Whatever you are currently doing, there is always room for improvement.

I have been providing this type of counseling service, free of charge, for 12 years. I am convinced that most people need to see their spending documented. Once we have that clarity, specific cost-of-living items can be discussed and modified. This budget development process is extremely comprehensive, taking into account all expenditures that occur throughout the year. Then, since so many bills come monthly, we break it down to an average number that it takes to run your household for 1/ 12th of the year. If this number is greater than your average monthly income, then you are in trouble and it is likely that you are headed for disaster.

A side benefit of our Money Coaching program at The River Center is that we can and will provide professional advice on tax strategies that contribute significantly towards that goal of a balanced budget. If your household income is in the low-to-moderate income range, we can also prepare your tax return for free. To learn more, call 924-6800 or stop by the River Center at 46 Concord St., Route 202, in Peterborough.

Larry Schwartz of Hancock has been providing financial advice in the Monadnock region for 12 years. He has been trained in all areas of personal finance and he volunteers as the official Money Coach for The River Center in Peterborough.